Colin D. v. Morgan Stanley Medical Plan

Background

Colin D., a minor, and Joseph D., individually and as Colin’s guardian, were participants or beneficiaries of the Morgan Stanley Medical Plan. The Plan covered mental-health services when they were medically necessary. United Behavioral Health, Inc. (UBH), one of the Plan’s mental-health claim administrators, had authority to interpret the Plan and determine eligibility for benefits.

Defendants approved coverage for Colin’s residential treatment at ViewPoint from August 1 through September 25, 2018, and initially approved his treatment at Heritage from September 26 through September 28, 2018. UBH then denied further coverage beginning September 29, 2018, relying on the Optum Level of Care Guidelines. UBH concluded that Colin had improved, was not aggressive, did not require 24-hour monitoring, and could continue treatment in a less intensive setting. UBH and an independent external reviewer later upheld the denial.

Plaintiffs challenged the denial under ERISA and also alleged that the Plan violated the Mental Health Parity and Addiction Equity Act (the Parity Act). The parties filed cross-motions for summary judgment, asking the court to decide the claims without a trial.

ERISA Benefit-Denial Claim

The court first addressed the proper standard of review. The Plan gave UBH discretionary authority, which ordinarily would require deferential review of the benefit denial. Plaintiffs argued that the court instead had to review the denial independently because Defendants violated federal regulations governing benefit-denial notices.

The court agreed that Plaintiffs showed a violation of the notice regulations. The first three denial letters referred to the Optum Guidelines but did not identify the specific Plan provisions supporting the denial or specifically explain the Plan’s medical-necessity requirement. The court held that the later external-review letter, which provided more detail and cited the Plan’s medical-necessity provisions, did not cure the earlier defects.

Defendants did not establish that the regulatory violation was inadvertent and harmless. The court therefore reviewed the benefit denial de novo, meaning without deference to UBH’s decision. The court limited its review to the administrative record because the parties had not agreed to a trial on that record.

The court found conflicting medical evidence about whether Colin required continued 24-hour residential treatment after September 28, 2018. Providers at Heritage and several outside professionals supported continued residential care, while UBH physicians and the independent reviewer concluded that Colin had improved and could receive care at a lower level. Resolving the dispute would require weighing competing medical opinions, which the court could not do on a traditional summary-judgment motion. The court therefore denied both Plaintiffs’ and Defendants’ motions for summary judgment on the ERISA benefit-denial claim.

Parity Act Claims

Plaintiffs alleged two Parity Act violations. First, they argued that the Plan reimbursed travel and lodging for certain medical treatments but not for mental-health treatment. Second, they argued that the Plan applied the Optum Guidelines to mental-health claims without applying comparable guidelines to medical or surgical claims.

Travel and Lodging

The court granted Defendants summary judgment on the travel-and-lodging claim. To prove a Parity Act violation, Plaintiffs had to identify an analogous medical or surgical treatment in the same classification as Colin’s mental-health treatment and show that the Plan imposed a more restrictive limitation on the mental-health treatment.

Colin’s Heritage treatment was classified as inpatient, out-of-network care. The Plan’s travel and lodging benefits were available only when an in-network facility was used. Plaintiffs did not identify an analogous out-of-network medical or surgical treatment that received the challenged benefit. The court also found that Plaintiffs did not explain how the listed medical treatments—such as cancer treatment, obesity surgery, transplants, and knee, hip, or spine surgery—were sufficiently analogous to residential mental-health treatment. The court therefore dismissed this Parity Act claim, identified as the Fourth Cause of Action.

Use of the Optum Guidelines

The court also granted Defendants summary judgment on the claim concerning the Optum Guidelines. The court accepted skilled nursing facility care as an appropriate medical or surgical comparison for residential mental-health treatment because both were inpatient services.

Plaintiffs argued that mental-health claimants faced an extra hurdle because UBH used the Optum Guidelines, while skilled-nursing claims allegedly were evaluated only under the Plan’s basic medical-necessity standard. Defendants presented evidence that UBH used the MCG Guidelines to evaluate skilled-nursing claims.

The court concluded that the Optum Guidelines and MCG Guidelines did not impose materially different treatment limitations. Both operated under the Plan’s medical-necessity definition, were described as based on clinical evidence and expertise, and required that treatment could not safely and effectively be provided at a lower level of care. The court also found that the Plan authorized, but did not require, use of the Optum Guidelines. Plaintiffs therefore did not prove that mental-health treatment was subject to more restrictive limitations. The court granted Defendants summary judgment on this claim, identified as the First Cause of Action.

Disposition

The court granted in part and denied in part Defendants’ motion for summary judgment. Specifically, it granted Defendants’ motion on the Parity Act claims and denied it on the ERISA benefit-denial claim. The court denied Plaintiffs’ motion for summary judgment. The parties were directed to meet with Magistrate Judge Gabriel W. Gorenstein for settlement discussions regarding the remaining ERISA claim and to address whether they would consent to a trial on the administrative record if settlement efforts failed.